Income Tax Appellate Tribunal - Pune
K.F. Bioplant Pvt. Ltd., , Pune vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench "A" , Pune
Before Shri G.S. Pannu Accountant Member
and Shri R.S. Padvekar Judicial Member
ITA No. 1110/PN/2011
(Asstt. Year : 2007-08)
Income Tax Officer, ... Appellant
Ward-11(3),
4th floor, "C" Wing, PMT Building,
Swargate,
Pune
v.
K.F. Bioplant Pvt. Ltd. ... Respondent
East Street, Camp,
Pune
PAN: AABCK4309E
Appellant by : Shri Mukesh Verma, CIT
Respondent by : Shri Rajendra Agiwal
Date of Hearing : 17/09/12
Date of Pronouncement : - 9-12
ORDER
Per R.S. Padvekar, JM
In this appeal, the Revenue has challenged the impugned order of the Ld CIT(A) -I, Pune, dated 19.1.2011 for the A.Y. 2007-08. The Revenue has taken the following effective grounds in the appeal :
"01) The learned Commissioner of Income-tax (Appeals) grossly erred in directing the Assessing Officer to treat assessee's income as agriculture income u/s. 2(1A)(b)(i) of the Income-tax Act, 1961 and to exclude said income u/s 10(1) of the Act.
02. The learned Commissioner of Income-tax (Appeals) grossly erred in ignoring the facts that there is no basic place in a green house and tissue culture laboratory which cannot be termed as land or nursery for growing plants.
03. The learned Commissioner of Income-tax (Appeals) grossly erred in ignoring the facts that the sale of the assessee consisted mainly of flowering plants developed out of imported mother plants in a tissue culture laboratory and not grown in a nursery."
2. The facts in brief are as under. The assessee is primarily engaged in the business of plant floriculture/tissue culture. The assessee has claimed exemption of the income from the above activities u/s. 10(1) 2 ITA No.1110/PN/2011 K.F. Bioplant Pvt Ltd..
A.Y. 2007-08 r.w.s. 2(1A)(b)(i) of the Act as agriculture income. The Assessing Officer declined to accept the claim of the assessee that income from the activities of the floriculture/tissue culture and horticulture is the agriculture income in spite of the fact that the said issue has been decided in favour of the assessee by the ITAT, "B" Bench in assessee's own appeal for the A.Y. 2004-05 being ITA No. 146/PN/08, order dated 26.3.2009. The Assessing Officer made the addition of Rs. 4,76,171/- by giving the reason that the decision of the ITAT, Pune in assessee's own case cannot be followed as the further appeal is filed before the Hon'ble Bombay High Court. The Ld CIT(A) following the decision of the ITAT Pune Bench in assessee's own case, allowed the claim of the assessee.
3. We find that the Tribunal has allowed the identical claim of the assessee on the identical set of facts in the A.Y. 2004-05. The said order of the Tribunal is followed in the other years also being A.Ys. 2001-02, 2003-04 and 2005-06 and 2006-07 being ITA Nos. 1274 to 1278/PN/2010, common order dated 22.2.2012. The operative part of the order of the Tribunal in ITA Nos. 1274 to 1278/PN/2010 dated 22nd February 2012 is as under :
"7. We find that the Tribunal in the case of assessee for the A.Y. 2004- 05 has discussed an identical issue in detail before deciding the same in favour of the assessee. The Tribunal while deciding the issue has taken strength from several decisions including decision of Hon'ble Supreme Court in the case of CIT Vs. Raja Benoy Kumar Sahas Roy (Supra), Hon'ble Madrash High Court in the case of CIT Vs. Soundarya Nursery, 241 ITR 530(Mad.) and of Hon'ble Allahabad High Court in the case of Jugal Kishore Arora Vs. DCIT, 269 ITR 133 (Allhad.). The relevant para Nos. 33 to 40 of the decision of the Tribunal in the case of the assessee for A.Y. 2004-05 (supra) are being reproduced hereunder for a ready reference :
"33. In our considered view, therefore, the operations carried out on the facts of the case before us are agricultural operations in nature. The objections taken by the authorities below are devoid of any legally sustainable merits/. Applying the ratio of the Hon'ble Supreme Court's judgment in the case of Raja Benoy Kumar Sahas Roy (supra), the income from these operations has to be treated as agricultural income.3 ITA No.1110/PN/2011
K.F. Bioplant Pvt Ltd..
A.Y. 2007-08
34. We would also like to deal with Hon'ble Madras High Court's judgment in the case of CIT Vs. Soundarya Nursery (supra) at this stage. As far as the facts of the case were concerned, Their Lordships, inter alia, noted as follows :
The Tribunal, after considering all the relevant facts, as also the appli-cable law, concluded that the assessee's activities are to prepare seedlings on scientific lines: that the other plants are grown on prepared beds on lands owned by it and the plants are then grafted or budded ; that' the resulting grafts are transplanted in suitable containers and are reared in green houses or in shade and after they take root, they are transmitted to large containers filed with top soil and manure, etc, till they establish themselves; and thereafter those plants are sold and that the primary source of the plant is the mother plant, which is reared on earth and for which activities, certainly contribution of human labour and energy are essential.
35. Their Lordships thus clearly noted "the primary source of the plant in the assessee's activities was the mother plant, which is reared on earth and for which certainly contribution of human labour and energy was essential". These observations equally apply to assessee's case as well.
36. In Soundarya Nursery's case, Hon'ble Madras High Court, after taking note of the law laid down by the Hon'ble Supreme Court in the case of Raja Benoy Kumar Sahas Roy (supra) and the facts of the case, observed as follows :
All the products of the land, which have some utility either for consumption or for trade or commerce, if they are based on land, would be agricultural products. Here, it is not the case of the Revenue that without performing the basic operations, only the subsequent operations, as described in the decision of the apex court have been performed by the assessee. If the plants sold by the assessee in pots were the result of the basic operations on the land on expending human skill and labour thereon and it is only after the performance of the basic operations on the land, the resultant product grown or such part thereof as was suitable for being nurtured in a pot, was separated and placed in a pot and nurtured with water and by placing them in the green house or in shade and after performing several operations, such as 4 ITA No.1110/PN/2011 K.F. Bioplant Pvt Ltd..
A.Y. 2007-08 weeding, watering, manuring, etc., they are made ready for sale as plants all these questions would be agricultural operations all this involves human skill and effort. Thus, the plants sold by the assessee in pots were the result of primary as well as subsequent operations comprehended within the term "agriculture" and they are clearly the products of agriculture.
37. When we apply the above tests to the facts of the present case, and we bear in mind our findings that basic operations are carried out in the present case, which require human skill and labour, and subsequent operations, no matter how sophisticated, if that be used against the assessee, are only to foster the growth and to protect the produce, we find that the income from these operations can only be said to be agricultural income. Their Lordships were also dealing with a situation in which operations were carried on in a greenhouse. Therefore, merely because a greenhouse in involved, the nature of operations would not change. Learned CIT(A) has distinguished this precedent on the ground that in assessee's case, basic operations have not been carried out on land. That premises itself, for the detailed reasons set out earlier in this order, rests on a unsustainable legal foundation. The basic operations have been, and can only be, carried out on the land. The fact that this land is in a greenhouse does not change the character of operations. The distinction was thus wrongly made out by the CIT(A), in our considered view, the principles laid down by the Hon'ble Madras High Court's judgment in the case of Soundaraya Nursery (supra) apply to the facts of the case before us as well.
38. We may also refer to Hon'ble Allahabad High Court judgment in the case of Jugal Kishore Arora Vs DCIT (269 ITR 133). In this case, Their Lordships, after taking note of and analyzing the landmark Supreme Court judgment in the case of Raja Benoy Kumar Sahas Roy (supra), also observed that "the nature of produce raised has no relevance to the character that "the nature of produce raised has no relevance to the character of agricultural operation". It was noted that cultivation of flowers of artistic and decorative value would also be included in the scope of agricultural operations. This observation will also apply to the facts of the present case.
39. We may mention that our attention was also invited to Explanation (3) to Section 2(1A) of the Act which has been inserted by the Finance 5 ITA No.1110/PN/2011 K.F. Bioplant Pvt Ltd..
A.Y. 2007-08 Act, 2008. This Explanation provides that any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income and, therefore, irrespective of whether the basic operations have been carried out on land, such income will be treated as agricultural income qualifying for exemption under section 10(1) of the Act. Learned counsel has contended that this Explanation is retrospective in effect inasmuch as it is merely clarificatory in nature. We are taken through the budget speech by the Finance Minister, Explanatory Memorandum to the Finance Bill and other documents to support the contention that this amendment in law was merely clarificatory. Our attention was thus invited to several judicial precedents in which it is noted that even while an amendment is stated to be prospective in application, but held to be retrospective in effect. On the basis of these elaborate arguments, it was submitted that, in any event, based on this clarificatory amendment in law, basic operations having been carried out on land is no longer sine qua non for treating income as agricultural income. This plea was clearly an alternative plea. Since we have allowed the basic plea of the assessee and we have held that the basic operations were carried out on land, it is not really necessary to deal with this alternative plea which is only academic in the present content. We leave it at that.
40. In view of the above discussions, and for the reasons set out above, we are of the considered view that the authorities belong indeed erred in law and on facts of this case in holding that the impugned income is not agricultural income. We, therefore, direct the Assessing Officer to treat the said income as agricultural income under section 2 (1A)(b)(i) of the Act. As a corollary to this direction, the Assessing Officer shall also exclude the said income from the total income under section 10(1) of the Act. The assessee gets the relief accordingly."
Since the issue raised is fully covered by the decision of Pune Bench of the Tribunal in the case of assessee itself for the A.Y. 2004-2005, under similar set of facts, we do not find infirmity in the first appellate order on the issue in favour of the assessee based on the said order of the Tribunal under similar facts during the assessment year under consideration. The same is upheld. The grounds involving the issue are thus rejected."
6 ITA No.1110/PN/2011K.F. Bioplant Pvt Ltd..
A.Y. 2007-08
4. As the issue is identical in this year, we find no reason to take different view. We, therefore, following the orders of the Tribunal in assessee's own case referred (Supra), confirm the order of the Ld CIT(A) and dismiss all the grounds taken by the Revenue.
5. In the result, Revenue's appeal is dismissed.
The order is pronounced in the open Court on 25th September 2012.
Sd/- Sd/-
(G.S. PANNU) (R.S.PADVEKAR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 25th September, 2012
US
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT- I,Pune
4. The CIT(A)-I,Pune
5. The D.R. "A" Bench, Pune
6. Guard File
/- true copy-/
By order
Senior Private Secretary
Income Tax Appellate Tribunal
Pune